THE Revenue Commissioners are set to lose millions in property tax after a major blunder in the wording of legislation gave a three-year exemption to all homeowners who bought during 2013.

Thousands of people are also expected to be refunded a total of €3.6m in the latest embarrassing debacle to beset the controversial new tax.

The Irish Independent has learned that sloppy wording in legislation drafted by the Department of Finance and Revenue has let thousands of homeowners off the hook for the new tax.

Property tax laws drawn up this year were supposed to give exemptions to first-time buyers, as well as those who bought a new house from a builder or property developer before 2016.

But the loosely worded legislation means that Revenue is now being forced to interpret the law as allowing an exemption to anyone buying a property to live in this year.

It can also be revealed today that the Revenue has known about the mess since the summer but has failed to publicise it.

So far, about 20,000 people have bought residential property in Ireland this year.

The error means that all those who bought houses or apartments in 2013 will be exempt from the tax for three years, provided they are living in those properties, as opposed to being investment buyers.

It is estimated that around half of the purchasers were first-time buyers, who would have been exempt anyway, but the other half should have been liable for the tax.

Around 4,000 of this group bought investment properties but the rest – around 6,000 – will share refunds of millions of euro if they have already paid the property tax.

The tax on a €250,000 house is €205 this year, when just six months were charged, and €405 for next year. Over the entire period in question, the homeowner will save about €1,400 – money that should have been paid to the Revenue.

Revenue was already embroiled in controversy as homeowners discovered they would have to make property tax payments twice this year if they opted for payment by debit or credit card or cheque.

Now a spokeswoman for the Revenue has admitted that officials will be forced to apply the exemption from the tax to all those buying a property to live in this year.

"The result is that a person who purchases a second-hand house and occupies it as a sole or main residence is entitled to the exemption regardless of the fact that they are not a first-time buyer," the Revenue said.

The mix-up happened because the property tax legislation allows two types of buyers who purchase this year to avoid the tax up to 2016:

* First-time buyers of new or second-hand homes.

* People buying a brand-new house from a builder or from a property developer.

But Brendan Burgess, founder of Askabout-money.com, spotted the loophole in the legislation.

He said: "The legislation was written incorrectly. This drafting error means that the exemption from the property tax applies to all buyers in 2013 who are living in the property they purchase – not just first-time buyers."

He also found a Revenue "operation manual" document, showing that officials had known this since the summer.

When this was put to Revenue, the spokeswoman admitted: "The operational manual was published in July." But there has been no attempt by the tax authorities to tell the public about the cock-up.

LOOPHOLE

"Yes, they will be refunded if they meet the conditions of the relief," the Revenue spokeswoman added. But she stressed that the exemption would not apply to investors.

Mr Burgess said: "This is fantastic news for thousands of owner occupiers who paid or expect to have to pay local property tax and now don't have to."

He advised anyone thinking of buying to attempt to close the deal by the end of the year to get the exemption.

Any owner-occupiers who bought this year and paid the tax should contact Revenue for a refund and to register for the exemption, he said.